The average two-year fixed rate for landlords dropped to 4.88% in September, down from 4.91% in August and from 5.35% a year ago.

The average five-year rate fell to 5.21% from 5.23% last month and from 5.33% a year ago.

Buy-to-let rates have not dropped below this level since September 2022.

Back then, in the weeks before the Liz Truss mini-Budget sent mortgage costs soaring, the average BTL two-year rate was 4.47% and the average five-year rate was 4.72%.

Product choice has also improved dramatically over the past year, Moneyfacts found.

The total number of buy-to-let deals on the market has risen by 44% from 3,186 a year ago to 4,597 this month.

However, landlords are facing significant challenges from regulation and potential tax reforms.

Moneyfactscompare.co.uk finance expert Rachel Springall says: “Tax changes over the years have made it more challenging for investors to hit desirable profit margins.

“The speculation on further changes to hit private landlords in the upcoming Budget will also lead to more concerns.

“Those who do not have buy-to-lets held in a limited company could get hit if National Insurance Contributions are levied on pre-mortgage profits.

“Hamptons had previously estimated that a limited company would be the structure of choice for the next generation of investors.

“The growing number of set-ups will only escalate if the government makes the NICs levy rumour a reality.

“The mounting pressure on landlords is stark, as recent figures from UK Finance revealed buy-to-let mortgage repossessions are up by 11% year-on-year.

“Not only this, but there are growing reasons for landlords to seriously consider leaving the market, or to reduce their portfolio.

“A record 26% of landlords sold at least one property in 2024 while just 8% of landlords bought, according to a survey from the National Residential Landlords Association (NRLA).

“It doesn’t stop there, as many are waiting with bated breath on the decisions surrounding the Renters’ Rights Bill.

“One of the major areas here is the abolition of Section 21 ‘no-fault’ evictions, which will offer greater security to renters, because landlords will no longer be able to evict tenants without providing a reason.

“Another area being reviewed in the Renters’ Rights Bill, which will favour tenants, is the Decent Homes Standard, in which landlords will have to make sure that their rented property meets specific heat, safety and functionality requirements.

“However, since April 2020, landlords have been prohibited from letting properties with an EPC rating below E, so there would have already been progress to make the private rental sector (PRS) more energy-efficient, no doubt saving renters some cash on their energy bills as a result.

“New or existing landlords would be wise to seek advice to assess how any moves in the sector will impact them.

“If they want to exit the sector, they will need to understand the costs involved, which include any agent fees and Capital Gains Tax.”

Association of Residential Letting Agents (ARLA) Propertymark president Megan Eighteen says that the flow of landlords leaving the sector is causing an imbalance between the supply of rental property and demand which is pushing up rents for tenants.

She says: “Ultimately, it’s positive to see there is a glimmer of hope for those landlords looking to take out a buy to let mortgage as they become the most affordable they’ve been in years.

“However, successive governments have placed pressure on many other areas of a landlords’ finances for decades and with the news of yet another blow for investors due in the upcoming Budget, the future of the private rented sector is concerning.

“We need to value every part of our housing ecosystem as the fundamental issue to tackle is the lack of homes for the nation.

“Many people rely on their rental home and if we’re not careful in ensuring a healthy and sustainable mix of homes of all tenures, many could find it increasingly difficult and unaffordable when looking to move.”